<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 30, 1997 0-16288
HALIS, INC.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-1366235
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9040 Roswell Road, Suite 470, Atlanta, Georgia 30350
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (770) 641-5555
---------------------------------
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the last 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.01 Par Value 39,345,357
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Class Outstanding at August 11, 1997
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 705,925
Customer Claims and Premium Funds 516,453
Receivable, less allowance for possible losses
of $47,024 944,903
Inventories 10,178
Other current assets 88,848
------------
Total current assets 2,266,307
PROPERTY AND EQUIPMENT AT COST
Computer equipment 243,908
Office furniture and fixtures 333,311
Leasehold improvements 4,840
Real estate 22,973
Less: accumulated depreciation (151,993)
------------
Total property and equipment 453,039
OTHER ASSETS
Deposits 122,519
Goodwill, net of accumulated
amortization of $376,991 5,536,274
Capitalized software development costs,
net of accumulated amortization of $263,409 3,625,348
Other Intangibles, net of
accumulated amortization of $10,007 15,476
Notes receivable - related parties 603,090
Long term investments 5,000
------------
Total other assets 9,907,707
TOTAL ASSETS $ 12,627,053
============
</TABLE>
2
<PAGE> 3
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,303,282
Convertible promissory notes 1,506,000
Line of credit 34,862
Deferred revenue and customer deposits 718,818
Payroll and sales taxes payable 384,998
Premiums payable 510,965
Notes payable 288,786
Notes payable - related parties 94,241
Obligations under capital lease - current portion 76,617
------------
Total current liabilities 4,918,569
LONG-TERM DEBT, NET OF CURRENT PORTION
Notes payable - related parties 99,992
Obligations under capital lease - net of current portion 95,828
------------
Total long-term debt 195,820
STOCKHOLDERS' EQUITY
Common stock $.01 par value 100,000,000
authorized 32,979,413 issued and outstanding 329,794
Additional paid-in capital 22,098,793
Common stock subscribed 13,417
Accumulated deficit (14,922,590)
Treasury stock (6,750)
------------
Total stockholder's equity 7,512,664
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 12,627,053
============
</TABLE>
3
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HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND
COMBINED STATEMENTS OF OPERATIONS
OF THE PREDECESSOR FOR THE THREE MONTHS
ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PREDECESSOR
1997 1996
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<S> <C> <C>
SALES REVENUE $ 2,285,573 $ 622,148
COST AND EXPENSES
Cost of goods sold 967,979 275,077
Selling, general, and administrative 1,893,482 304,914
Research and development 423,660 90,106
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3,285,121 670,097
OPERATING LOSS (999,548) (47,949)
OTHER INCOME (EXPENSES)
Gain (loss) on asset disposal 0 (27,528)
Interest expense (39,113) (14,166)
Interest income 13,973 0
Other income (expense) (5,415) (7,500)
Merger costs (18,233) 0
Rental income 0 7,700
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(48,788) (41,494)
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NET LOSS BEFORE INCOME TAXES ($ 1,048,336) ($ 89,443)
INCOME TAX PROVISION $ 0 $ 0
------------ ---------
NET LOSS ($ 1,048,336) ($ 89,443)
============ =========
NET LOSS PER COMMON SHARE ($ 0.03)
============
WEIGHTED AVERAGE SHARES OUTSTANDING 32,227,220
</TABLE>
4
<PAGE> 5
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
COMBINED STATEMENTS OF OPERATIONS
OF THE PREDECESSOR FOR THE SIX MONTHS
ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PREDECESSOR
1997 1996
------------ -----------
<S> <C> <C>
SALES REVENUE $ 3,605,926 $ 1,302,224
COST AND EXPENSES
Cost of goods sold 1,399,064 815,734
Selling, general, and administrative 3,379,773 657,076
Research and development 708,334 126,923
------------ -----------
5,487,171 1,599,733
OPERATING LOSS (1,881,245) (297,509)
OTHER INCOME (EXPENSES)
Gain (loss) on asset disposal 8,678 (27,528)
Interest expense (77,492) (14,166)
Interest income 22,307 0
Other income (expense) 3,253 (7,500)
Merger costs (32,137) 0
Rental income 0 7,700
------------ -----------
(75,391) (41,494)
------------ -----------
NET LOSS BEFORE INCOME TAXES ($ 1,956,636) ($ 339,003)
INCOME TAX PROVISION $ 0 $ 0
------------ -----------
NET LOSS ($ 1,956,636) ($ 339,003)
============ ===========
NET LOSS PER COMMON SHARE ($ 0.07)
============
WEIGHTED AVERAGE SHARES OUTSTANDING 29,822,386
</TABLE>
5
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HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
COMBINED STATEMENTS OF CASH FLOWS
OF THE PREDECESSOR FOR THE
SIX MONTHS ENDED
JUNE 30, 1996
<TABLE>
<CAPTION>
PREDECESSOR
Cash flows from operating activities 1997 1996
----------- -----------
<S> <C> <C>
Net loss ($1,956,636) ($339,003)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation 68,567 8,835
Amortization 619,489 515
Gains (loss) on disposal of assets 0 27,528
Changes in assets and liabilities
Decrease (increase) in accounts receivable (899,900) (107,884)
Decrease (increase) in receivables-related parties (541,347) 703
Decrease (increase) in customer claims/premium funds (516,453) 0
Decrease (increase) in inventory 0 700
Decrease (increase) in prepaid expenses/other assets (78,962) 2,044
Decrease (increase) in deposits (106,085) (4,467)
Decrease (increase) in intangible assets 5,612 0
Increase (decrease) in accounts payable
& accrued expenses 394,622 (255,107)
Increase (decrease) in accrued expenses - related parties (75,784) 5,966
Increase (decrease) in sales & payroll taxes 18,593 (60,886)
Increase (decrease) in deferred revenues
& customer deposits 699,712 (79,862)
Increase (decrease) in premiums payable 510,965 0
Increase (decrease) in other current liabilities 0 690
Increase (decrease) in income tax payable 0 (6,908)
Increase (decrease) in accrued salary - officer 0 600
Total adjustments 99,029 (467,533)
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Net cash provided (used) by operating activities ($1,857,607) ($806,536)
</TABLE>
6
<PAGE> 7
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
COMBINED STATEMENTS OF CASH FLOWS
OF THE PREDECESSOR FOR THE
SIX MONTHS ENDED
JUNE 30, 1996
<TABLE>
<CAPTION>
PREDECESSOR
1997 1996
----------- ---------
<S> <C> <C>
Cash flows from investing activities
Purchase of equipment and furniture ($ 461,452) ($ 7,252)
Net costs of acquisitions (64,077) 0
Decrease (increase) in long term investments (5,000) 0
Deferred merger costs 0 (169,339)
Insurance recovery from equipment loss 0 5,024
Proceeds from sale of maintenence contracts 0 47,912
----------- ---------
Net cash provided (used) by investing activities ($ 530,529) ($123,655)
Cash flows from financing activities
Proceeds (net payments) from/on bank lines of credit $ 34,862 $ 0
Proceeds (net payments) from/on capital leases 172,445 0
Proceeds (net payments) from/on notes payable 78,786 315,051
Proceeds (net payments) from/on notes payable - affiliates 0 458,469
Proceeds (net payments) from/on notes payable - related parties 50,232 (16,101)
Proceeds (net payments) from/on LT debt - related party 0 50,000
Proceeds from private placements 2,037,747
----------- ---------
Net cash provided (used) by financing activities $ 2,374,072 $ 807,419
Net increase (decrease) in cash (14,064) (122,772)
Cash, beginning of the period 719,989 128,651
Cash, end of period $ 705,925 $ 5,879
</TABLE>
7
<PAGE> 8
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In management's opinion, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation have been included. Operating
results for the three-month and six-month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated financial
statements and the footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1996.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
On November 19, 1996, HALIS, Inc. (f/k/a Fisher Business Systems, Inc.,
the "Company") issued 15,000,000 shares (66.8%) of its common stock in exchange
for 100% of the capital stock of AUBIS Hospitality Systems, Inc. (AHS), AUBIS
Systems Integration, Inc. (ASI), and HALIS Software, Inc. (HSI), which included
ProHealth Solutions, Inc.
The acquisitions set out in the preceding paragraph were accounted for
as the reverse acquisition of HALIS, Inc. by an "accounting entity" consisting
of AHS, ASI, and HSI (collectively, the "Predecessor") because, following the
transaction, the former shareholders of AHS, ASI, and HSI were in control of the
Company. Accordingly, the financial statements of the Company are the financial
statements of the "accounting entity" adjusted for the assumed acquisition of
the net assets of HALIS, Inc. in exchange for the issuance of HALIS, Inc. common
stock outstanding before the transaction. The net assets of the Predecessor are
accounted for at their historical cost.
In accordance with purchase accounting principles pursuant to
Accounting Principles Board Statement No. 16, Business Combinations (APB 16),
the Company accounted for the net assets of HALIS, Inc. acquired at the fair
value of such net assets as of November 19, 1996.
During January, 1997, the Company effected three merger agreements with
companies that have been accounted for as purchases under APB 16 by the Company.
As a result of the acquisitions of The Compass Group, Inc. ("Compass"), Software
Manufacturing Group, Inc. (SMG), and American Benefit and Administrative
Services, Inc. and Third Party Administrators, Inc. (ABAS/TPA), the results of
operations for these three acquired companies are included in the Company's
Consolidated financial statements from their dates of acquisition (January 10,
24, and 31, respectively) through the period end of June 30, 1997.
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<PAGE> 9
The Company acquired TG Marketing Systems, Inc. (TGM) on May 2, 1997
through the issuance of 2,388,060 shares of its common stock. The results of
operations for TGM are included in the Company's Consolidated financial
statements from the acquisition date through the period end of June 30, 1997. It
is the opinion of management and legal counsel that these transactions qualify
as tax-free reorganizations within the meaning of Section 368 (a) of the
Internal Revenue Code of 1986. Management of all companies represent they have
no plans or intentions which would adversely affect the operations of any of the
companies.
On June 30, 1997, the Company formed HALIS Services, Inc. ("Services"),
a wholly owned subsidiary. Simultaneously, the Company performed a legal entity
consolidation by merging its Compass, SMG, HSI, AHS, AIS, and TGM subsidiaries
into Services. The reorganization was undertaken to simplify the Company's legal
structure and facilitate the operational and financial assimilation of the
acquisitions.
Principles of Consolidation
The consolidated financial statements include the accounts of HALIS,
Inc. and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
The combined financial statements of the Predecessor include the
accounts of AHS, ASI, HSI and ProHealth Solutions, Inc. All significant
intercompany accounts and transactions have been eliminated.
Merger Agreements:
Subsequent to the end of the accounting period, the Company closed the
following merger transactions:
Physicians Resource Network (PRN) 3,733,333 shares
PhySource Ltd. 2,632,611 shares
Legal expenses associated with completed mergers and acquisitions are
capitalized and amortized over 5 years. All other merger and acquisition costs
are expensed in the period incurred.
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<PAGE> 10
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
The following discussion should be read in conjunction with the
consolidated financial statements of HALIS, Inc. and subsidiaries contained
elsewhere herein. As a result of the acquisitions of AUBIS Hospitality Systems,
Inc. ("AHS"), AUBIS Systems Integration, Inc. ("ASI") and HALIS Software, Inc.
("HSI") in November 1996, which acquisitions were accounted for as a "reverse
acquisition," the financial statements of the Company are the financial
statements of the "accounting entity," consisting of AHS, ASI and HSI.
Accordingly, the financial statements of the Company are the financial
statements of the "accounting entity" adjusted for the assumed acquisition of
the net assets of the Company in exchange for the issuance of Company common
stock outstanding before the transaction. As a result, the Company's results of
operations for the three and six months ended June 30, 1996 consists of the
combined operations of AHS, ASI and HSI for period.
As a result of the acquisitions of The Compass Group, Inc. ("Compass"),
Software Manufacturing Group, Inc. ("SMG"), American Benefit and Administrative
Services, Inc., Third Party Administrators, Inc. ("ABAS/TPA"), and TG Marketing
Systems, Inc. ("TGM") during the first and second quarters of 1997, the results
of operations for these four acquired companies are included in the Company's
consolidated financial statements from their respective dates of acquisition
(January 10, January 24, January 31 and May 2, respectively).
Financial Condition
Total assets at June 30, 1997 totaled $12,627,053, an increase of
$11,488,924 or 1,009% from total assets of $1,138,129 at December 31, 1996. This
increase is primarily attributable to the
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<PAGE> 11
four acquisitions described above, and is reflected in the majority of the
Balance Sheet categories. In particular, accounts receivable, net fixed assets,
goodwill, and capitalized software development costs all exhibited substantial
increases during the period. Total assets also increased during the six month
period ended June 30, 1997 as a result of proceeds of $2,037,747 received from
the sale of common stock during such period.
Current liabilities increased from $1,723,955 at December 31, 1996 to
$4,918,569 at June 30, 1997. This increase of $3,194,614, or 185%, is again
largely attributable to the four acquisitions. The growth in current liabilities
also reflects the reclassification of the Company's 7% convertible notes from
long term debt, due to their January 15, 1998 maturity.
Stockholder's equity (deficit) increased from a deficit of $2,091,826
to a positive balance of $7,512,664, a difference of $9,604,490. This difference
is attributable to the issuance of 7,685,060 shares of common stock for the four
acquisitions, as well as the $2,037,747 raised in private placements of the
Company's common stock during the six months ended June 30, 1997.
RESULTS OF OPERATIONS
Sales revenue increased by $1,663,425 or 267% for the three months
ended June 30, 1997, and $2,303,702 or 177% for the six months ended June 30,
1997 as compared to the respective prior year periods. This increase is
primarily the result of consolidating the results of the four acquisitions
(Compass, SMG, ABAS/TPA and TGM) from their respective acquisition dates
(January 10, 24, and 31, and May 2) through the period end of June 30, 1997.
Cost of goods sold increased $692,902 or 252% in absolute terms for the
three months ended June 30, 1997, but declined as a percentage of sales from
44.2% for the three months ended June 30, 1996 to 42.4% for the three months
ended June 30, 1997. During the six month period ending June 30, 1997 the
Company's cost of goods sold as a percentage of revenue decreased to 38.8% from
62.6% for the same period in the prior year, reflecting the shift in product mix
away from lower margin hardware sales and support towards software sales and
support. The margin improvement would have been greater without the $169,555 of
amortized software development costs included in cost of goods sold amount of
$967,979.
Selling, general and administrative costs increased by $1,588,568 or
521% and $2,722,697 or 414% for the three and the six-month periods ended June
30, 1997, respectively. These increases resulted from the four acquisitions, as
well as the Company's investment in its corporate infrastructure to support
future growth. Amortization expense totaled $619,489 for the six months ended
June 30, 1997, most of which was attributable to goodwill ($220,116) and other
intangibles recorded for the acquisitions referenced above and as required by
APB 16.
Research and development costs increased by a total of $333,554 or 370%
and $581,411 or 458% for the three and the six-month periods ended June 30,
1997, respectively, reflecting the Company's continued investment in its
proprietary software technology.
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<PAGE> 12
The net loss of $1,048,336 and $1,956,636 for the three and the six
month periods ended June 30, 1997, respectively, is primarily attributable to
increased selling, general and administrative expenses, as well as the increased
research and development costs.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, operating activities
consumed $1,857,607 of cash, primarily due to the net loss of $1,956,636. As
discussed in the previous section, the primary reasons for the net loss are the
substantial selling, general and administrative expenses and research and
development expenses incurred to fund the corporate infrastructure development,
as well as the ongoing investment in the Company's proprietary software
products.
The Company recorded a net decrease in cash of $14,064 during the six
months ended June 30, 1997, offsetting the operational losses with proceeds from
private placements. Management continues to seek and evaluate potential sources
of additional capital to support the Company's expected future growth.
Financing activities during fiscal 1997 provided $2,374,072, primarily
the result of proceeds from the issuance of stock during the six months ended
June 30, 1997.
During 1996 and the first quarter of 1997, the Company effected a
private placement of shares of common stock in accordance with Regulation D of
the Securities and Exchange Commission. The shares were sold at $1.20 per share.
For every three shares of stock sold, one common stock warrant was issued to the
purchaser, which represents the right to purchase an additional share at $1.75
per share. In aggregate, 1,516,974 shares of common stock and 657,356 warrants
were issued, which included an additional 151,698 warrants issued to the
placement agent. All warrants expire December 31, 1999. The Company raised
$1,638,818 in capital after payment of issuance costs and related fees as of
December 31, 1996.
An additional $183,405 was raised (net of issuance costs and related
fees) in January, 1997 from the sale of 168,000 shares under the aforementioned
private placement terms. An additional 72,800 warrants were issued (including
16,800 to the placement agent) in connection with this placement.
During the first quarter of 1997, the Company initiated an additional
private placement (the "Second Placement") of common stock, which provided for
the issuance of up to 2,000,000 shares of stock at a price of $1.50 per share.
For every three shares of stock sold, one common stock warrant was issued to the
purchaser, which represents the right to purchase an additional share at $1.75
per share. As of March 31, 1997, the Company had issued 500,000 shares of common
stock and 216,667 common stock warrants (including 50,000 warrants issued to the
placement agent) for proceeds of $681,122, which are net of certain placement
costs of $68,878.
During the second quarter of 1997, the Company issued an additional
648,332 shares of common stock and 280,942 common stock warrants (including
64,833 warrants issued to the placement agent) for proceeds of $933,220, which
are net of certain placement costs of $85,078. These shares and warrants were
issued under the terms of the Second Placement.
The Company will likely require additional capital or other financing
to finance its operations and continued growth. There can be no assurance that
the Company will be able to obtain such financing if and when needed, or that if
obtained, it will be sufficient or on terms and conditions acceptable to the
Company.
In May 1997, the Company entered into a settlement agreement with a
former employee of HSI with respect to the amount of severance owed by HSI
pursuant to the employee's employment contract. The parties have reached a
settlement of $138,000 (which amount had been accrued by the Company at December
31, 1996), with $50,000 payable in installments through August 1997 and a lump
sum payment of $88,000 due September 1, 1997. The lump sum amount may, under
certain conditions, be paid in stock of the Company.
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<PAGE> 13
No provision has been made in the financial statements for any
settlements or judgments relating to either of the matters discussed herein or
in the Company's Annual Report on Form 10- KSB for the year ended December 31,
1996. In the event of a material judgment or settlement resulting from either of
these matters, the Company would experience an adverse effect on its liquidity.
Additionally, all agreements to date for the HES product have been for pilot
sites and have contingencies. In the event that the pilot testing identifies
substantive modifications to the product which are mandatory for marketplace
feasibility, additional development costs and/or delays in launching the product
could have a material adverse effect on liquidity.
FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
and Exchange Act of 1934, as amended, which are intended to be covered by the
safe harbors created thereby. These statements include the plans and objectives
of the Company for future operations. The forward-looking statements included
herein are based on current expectations that involve numerous risks and
uncertainties. The Company's plans and objectives are based on the assumption
that the Company's entry into the healthcare industry will be successful, that
competitive conditions within the healthcare industry will not change materially
or adversely and that there will be no material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements included herein are reasonable, the inclusion of such
information should not be regarded as a representation by the Company, or any
other person, that the objectives and plans of the Company will be achieved.
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<PAGE> 14
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On May 2, 1997, the Company issued 2,388,060 shares of common stock in
connection with the acquisition of TG Marketing Systems, Inc.
During the period from April 11, 1997 to May 30, 1997, the Company
issued 648,332 shares of common stock and 280,942 Warrants to twelve accredited
investors, resulting in proceeds of $972,500. Each Warrant entitles the holder
to purchase one share of common stock at a price of $1.75 per share. Warrants
are exercisable for a period expiring on December 31, 1999. The securities were
sold on behalf of the Company by Attkisson, Carter & Akers Incorporated (the
"Placement Agent"), who received a commission of 8.0% of the sales price of each
share sold in the offering, plus one Warrant to purchase shares of common stock
for each ten (10) shares of common stock sold in the offering. Commissions
totaling $77,800 were paid to the Placement Agent and warrants to purchase
64,833 shares of common stock were issued to the Placement Agent during the
period.
The issuance of securities described above were made in reliance on the
exemption from registration provided by Section 3(b) and/or 4(2) of the
Securities Act of 1933 as transactions by an issuer not involving a public
offering. All of the securities were acquired by the recipients thereof for
investment and with no view toward the resale or distribution thereof. In each
instance, the offers and sales were made without any public solicitation, the
certificates bear restrictive legends and appropriate stop transfer instructions
have been or will be given to the transfer agent. Except as described above, no
underwriter was involved in the transactions and no commissions were paid.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-KSB for a
description of certain actual and threatened legal proceedings involving the
Company relating to the suit filed in connection with the termination of the
Advanced Custom Computer Solutions, Inc. merger agreement.
In August 1995, the Company entered into a Finders Fee Agreement with
Penny Sellers, pursuant to which the Company agreed to pay Ms. Sellers a
commission equal to 10% of the amount of any equity investments in the Company
or software licensing fees paid to the Company in respect of transactions
introduced to the Company by Ms. Sellers. The compensation payable to Ms.
Sellers pursuant to the Finders Fee Agreement is limited to $500,000. In late
August 1995, Ms. Sellers introduced the Company to the principals of AUBIS,
L.L.C. ("AUBIS"). To date, the Company has paid $19,350 to Ms. Sellers, which
represents 10% of the investment made by the principals of AUBIS in a private
placement of convertible notes (in which private placement other investors
besides the AUBIS principals participated) and 10% of the amounts received by
the Company from the sale of Fisher Restaurant Management Systems by AUBIS.
Ms. Sellers has claimed that the entirety of a convertible notes
offering completed in 1996 (in which an aggregate of $1,470,000 was raised by
the Company) would not have been successful
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<PAGE> 15
but for her introduction of the AUBIS principals to the Company. As a result,
Ms. Sellers has made a claim for 10% of all amounts raised in the notes
offering. Ms. Sellers has also made a claim, based on the same rationale, to 10%
of all future capital funding raised by the Company (up to the $500,000 maximum
compensation). In this regard the Company has recently completed a private
placement which raised gross proceeds of approximately $2,000,000. Finally, Ms.
Sellers has made a claim for 10% of the value of AHS, ASI, and HSI, which were
acquired by the Company in November, 1996. Ms. Sellers filed suit with respect
to these claims against the Company, Larry Fisher and Paul W. Harrison on July
13, 1997, in the State Court of Fulton County, Georgia seeking actual damages
from the Company and Messrs. Fisher and Harrison in the amount of $480,534.70
and punitive damages from Messrs. Fisher and Harrison in the amount of
$1,000,000. The Company' management believes that these claims are outside the
scope of the Finders' Fee Agreement and intends vigorously to contest them.
There can be no assurance, however, that the Company will be successful in its
defense or that the resolution of this matter will not have a material adverse
effect on the financial condition or results of operation of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibit is filed with this
report:
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. The following reports on Form 8-K
were filed during the quarter ended June 30, 1997: Amendment No. 1 on Form 8-K/A
dated April 16, 1997 to its Current Report on Form 8-K dated January 31, 1997
(reporting acquisition of American Benefit and Administrative Services, Inc and
Third Party Administrators, Inc.), and Current Report on Form 8-K dated May 2,
1997 (reporting acquisition of TG Marketing Systems, Inc.).
-15-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HALIS, INC.
Dated: August 13, 1997 By: /s/ Paul W. Harrison
----------------------------------------
Paul W. Harrison, Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Dated: August 13, 1997 By: /s/ Harold J. Williams, III
----------------------------------------
Harold J. Williams, III, Chief Financial
Officer (Principal Accounting Officer)
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,222,378
<SECURITIES> 0
<RECEIVABLES> 991,927
<ALLOWANCES> 47,024
<INVENTORY> 10,178
<CURRENT-ASSETS> 2,266,307
<PP&E> 605,032
<DEPRECIATION> 151,993
<TOTAL-ASSETS> 12,627,053
<CURRENT-LIABILITIES> 4,918,569
<BONDS> 195,820
0
0
<COMMON> 329,794
<OTHER-SE> 7,182,870
<TOTAL-LIABILITY-AND-EQUITY> 12,627,053
<SALES> 0
<TOTAL-REVENUES> 3,605,926
<CGS> 0
<TOTAL-COSTS> 1,399,064
<OTHER-EXPENSES> 4,088,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,492
<INCOME-PRETAX> (1,956,636)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,956,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,956,636)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> 0
</TABLE>
